INCOME TAXES

The Company’s effective income tax rate is dependent on many factors, including the estimated nature of many amounts and the mix of revenues and expenses between U.S. corporate subsidiaries that are subject to income taxes and those subsidiaries that are not. Additionally, the Company’s effective tax rate is influenced by the amount of income tax provision recorded for any affiliated funds and co-investment entities that are consolidated in these financial statements. Consequently, the effective income tax rate is subject to significant variation from period to period.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal, state, local and foreign tax regulators. With limited exceptions, the Company is no longer subject to income tax audits by taxing authorities for any years before 2013. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s consolidated financial statements.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law creating significant and material updates to the Internal Revenue Code. The most significant change is a decrease of the corporate tax rate from 35% to 21%. The reduction in the corporate tax rate is effective for tax years beginning on or after January 1, 2018. The Company estimated the tax effects of the Tax Cuts and Jobs Act in its fourth quarter tax provision in accordance with its understanding of the changes and guidance available as of the date of this filing. The result was a $0.7 million income tax benefit in the fourth quarter of 2017, the period of enactment of the new tax law. The provisional amount relates to the remeasurement of certain deferred tax assets and liabilities based on the new rates at which they are expected to be reversed. Other significant changes are also included in the Tax Cuts and Jobs Act and will continue to be analyzed.

On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB”) 118 to address the application of U.S. GAAP in regards to the change in tax law for registrants that do not have all of the necessary information available to analyze and calculate the accounting impact for the tax effects of the Tax Cuts and Jobs Act. Under SAB 118, the Company determined that approximately $0.7 million of deferred tax benefit should be recorded as a result of the remeasurement of certain deferred tax assets and liabilities that are impacted by the reduction in the U.S. corporate federal income tax rate at December 31, 2017. Additional work is necessary for a more detailed analysis on the tax effects of all aspects of the Tax Cuts and Jobs Act. Any subsequent adjustments to these amounts will be recorded to tax expense in the quarter that the required analysis is completed.

The provision for income taxes attributable to the Company and the Consolidated Funds, consisted of the following for the years ended December 31, 2017, 2016 and 2015:



	Year Ended December 31,
Provision for Income Taxes - The Company	2017			2016			2015
Current:
U.S. federal income tax (benefit)	$	(21,559	)	$	19,419		$	12,064
State and local income tax	454			3,706			4,839
Foreign income tax	3,741			8,458			1,509
	(17,364		)	31,583			18,412
Deferred:
U.S. federal income tax (benefit)	(3,466		)	(14,247		)	356
State and local income tax (benefit)	(2,414		)	(1,400		)	306
Foreign income tax (benefit)	(1,695		)	(4,180		)	(14		)
	(7,575		)	(19,827		)	648
Total:
U.S. federal income tax (benefit)	(25,025		)	5,172			12,420
State and local income tax (benefit)	(1,960		)	2,306			5,145
Foreign income tax	2,046			4,278			1,495
Income tax expense (benefit)	(24,939		)	11,756			19,060

Provision for Income Taxes - Consolidated Funds
Current:
U.S. federal income tax	—			—			—
State and local income tax	—			—			—
Foreign income tax (benefit)	1,887			(737		)	4
	1,887			(737		)	4
Deferred:
U.S. federal income benefit	—			—			—
State and local income benefit	—			—			—
Foreign income benefit	—			—			—
	—			—			—
Total:
U.S. federal income benefit	—			—			—
State and local income benefit	—			—			—
Foreign income tax (benefit)	1,887			(737		)	4
Income tax expense (benefit)	1,887			(737		)	4

Total Provision for Income Taxes
Total current income tax expense (benefit)	(15,477		)	30,846			18,416
Total deferred income tax expense (benefit)	(7,575		)	(19,827		)	648
Total income tax expense (benefit)	$	(23,052	)	$	11,019		$	19,064

The effective income tax rate differed from the federal statutory rate for the following reasons for the years ended December 31, 2017, 2016 and 2015:



	Year Ended December 31,
	2017		2016		2015
Income tax expense at federal statutory rate	35.0	%	35.0	%	35.0	%
Income passed through to non-controlling interests	(51.1	)	(27.6	)	(24.2	)
State and local taxes, net of federal benefit	(1.4	)	0.9		5.6
Foreign taxes	0.3		(0.9	)	1.4
Permanent items	0.3		(2.2	)	6.0
Tax Cuts and Jobs Act	(0.4	)	—		—
Other, net	0.4		(1.7	)	0.9
Valuation allowance	1.3		0.2		(1.3	)
Total effective rate	(15.6	)%	3.7	%	23.4	%

Deferred Taxes

The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows as of December 31, 2017 and 2016:



	As of December 31,
Deferred Tax Assets and Liabilities of the Company	2017			2016
Deferred tax assets
Net operating losses	$	2,827		$	99
Investment in partnerships	—			3,774
Other, net	6,542			2,897
Total gross deferred tax assets	9,369			6,770
Valuation allowance	(15		)	(39		)
Total deferred tax assets, net	9,354			6,731
Deferred tax liabilities
Investment in partnerships	(1,028		)	—
Other, net	—			—
Total deferred tax liabilities	(1,028		)	—
Net deferred tax assets	$	8,326		$	6,731



	As of December 31,
Deferred Tax Assets and Liabilities of the Consolidated Funds	2017			2016
Deferred tax assets
Net operating loss	$	4,703		$	4,951
Other, net	2,173			53
Total gross deferred tax assets	6,876			5,004
Valuation allowance	(6,876		)	(5,004		)
Total deferred tax assets, net	$	—		$	—

In assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred taxes are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances are provided to reduce the amounts of deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts.

The valuation allowance for deferred tax assets increased by $1.9 million in 2017 due to additional net valuation allowances recorded related to operating losses generated deductible temporary differences in various jurisdictions in which the Company operates, offset by the reduction of valuation allowances recorded in prior years for which the Company is able to conclude that the realization of the related deferred tax asset is more likely than not as of December 31, 2017. The valuation allowance for deferred tax assets increased by $0.5 million in 2016 due to additional net valuation allowances recorded related to operating losses incurred in various jurisdictions in which the Company operates, offset by the reduction of valuation allowances recorded in prior years for which the Company is able to conclude that the realization of the related deferred tax asset is more likely than not as of December 31, 2016.

At December 31, 2017, the Company had $24.8 million of net operating loss ("NOL") carryforwards attributable to its consolidated funds available to reduce future foreign income taxes for which a full valuation allowance has been provided. The majority of the foreign NOLs have no expiry. The Company generated a NOL for U.S. federal income tax purposes of approximately $71.2 million in 2017, primarily driven by the deduction of the ACAS transaction support payment made in the first quarter of 2017. The Company anticipates to carryback the NOL to the 2015 and 2016 tax years for U.S. federal income tax purposes resulting in a tax receivable of approximately $21.8 million. The deduction also generated state NOLs which will be carried forward and available to reduce state income taxes.

As of, and for the three years ended December 31, 2017, 2016 and 2015, the Company had no significant uncertain tax positions.